Investing.com - U.S. crude inventories surged unexpectedly, driving oil prices even further into bear market territory.
The Energy Information Administration said in its regular weekly report that crude oil inventories increased by 6.77 million barrels in the week to May 31.
That was compared to forecasts for a stockpile draw of 0.85 million barrels, after a drop of 0.28 million barrels in the previous week.
The EIA report also showed that gasoline inventories increased by 3.21 million barrels, compared to expectations for a gain of 0.63 million barrels, while distillate stockpiles rose by 4.57 million barrels, compared to forecasts for a build of 0.50 million.
Oil prices extended an already sharp decline after the report. U.S. crude prices slid 4.1% at $51.27 a barrel by 10:55 AM ET (14:55 GMT), compared to $52.86 prior to the publication.
London-traded Brent crude futures slumped 2.9% to $60.16 a barrel, compared to $61.39 ahead of the release
Investing.com senior commodity analyst Barani Krishnan said that the data could not possibly be worse with crude prices already at four-month lows and in a bear market.
“This is the time of year when fuel sales at pumps should be ramping up from the summer driving demand that should already be evident,” he explained.
Krishnan also pointed out that refinery run rates were at healthy levels, but seemed insufficient to counter escalating U.S. crude production at record highs of 12.4 million barrels per day.
“I think a WTI test below $50 and Brent test under $60 is definitely in order now,” he concluded.
Oil entered a bear market this week on worries that escalating trade disputes between the U.S. and both Mexico and China would ultimately lead to a global recession with a damaging effect on demand for crude.
Saudi Arabia, the de facto leader of OPEC, was reported earlier this week to have hinted at extended supply cuts to support oil prices. But one of its allies may have a different opinion.
On Tuesday, the head of Russian oil giant Rosneft, Igor Sechin, was quoted by Interfax news agency as saying “Does it make sense (for Russia) to reduce (oil output) if the U.S. immediately takes (our) market share?” He also reportedly suggested that Russia should pump at will and he would seek compensation from the government if the cuts were extended.
“The chief executive of Russia’s giant oil producer, which also happens to be the world’s largest publicly-traded petroleum company, could singularly do more damage to OPEC now than any crude short-seller in New York or London,” Investing.com senior commodity analyst Krishnan remarked.
OPEC, together with its allies, has been withholding production since the start of the year to prop up the market.
Russian and Saudi energy ministers, Alexander Novak and Khalid al-Falih, were scheduled to chair a trade and economy commission in Moscow on June 10, according to a statement from the Russian Ministry of Energy. The two would likely hold discussions over plans to extend the current production curbs.
OPEC is still officially scheduled to meet on June 25 to discuss an extension with its non-member allies tentatively scheduled to join the following day